U.S. stocks nosedived Tuesday after a surprising inflation report showed prices rose more than expected last month. All three major averages logged their worst day since June 2020.

Technology stocks led the way down, with the Nasdaq Composite plunging 5.2%. Tuesday's session marks the seventh time this year the Nasdaq slid 4% or more, per data from Bespoke Investment Group. No declines of the same size were recorded last year, while 10 were experienced in 2020.

The S&P 500 sank 4.3%, while the Dow Jones Industrial Average erased more than 1,275 points, or roughly 4%.

The Bureau of Labor Statistics released its Consumer Price Index (CPI) for August early Tuesday, which showed prices rose 8.3% over the prior year and 0.1% over the prior month. Economists had expected an 8.1% increase in inflation over last year and a decline of 0.1% over the prior month.

This reading marks some moderation in price increases — which reached four-decade highs earlier this year — but this smaller-than-expected decline likely clinches another 0.75% rate hike from the Federal Reserve at its policy meeting next week.

On a "core" basis, which excludes the more volatile costs of food and energy, prices rose 6.3% over last year in August and 0.3% over the prior month. Much of the steady rise in core inflation comes from the cost of shelter, which rose 0.7% over the prior month in August, the most since January 1991. Shelter costs comprise about a third of CPI.

"Headline inflation has peaked but, in a clear sign that the need to continue hiking rates is undiminished, core CPI is once again on the rise, confirming the very sticky nature of the U.S. inflation problem," said Seema Shah, chief global strategist at Principal Global Investors.

Following Tuesday's report, data from the CME Group showed investors pricing in an 82% chance of a 0.75% rate hike next week and an 18% chance of a 1% rate hike.

Last week, this data reflected a 75%-25% split between a 75-basis-point and a 50-basis-point rate hike.

Moves along the Treasury curve were also sharp on Tuesday, with the 10-year yield rising to around 3.44% while the 2-year yield surged by 15 basis points to as high as 3.72%.

Elsewhere in markets on Tuesday, Peloton (PTON) was in the spotlight on the heels of an announcement Monday afternoon that co-founder John Foley is stepping down from the board of directors, months after Peloton hired former Spotify exec Barry McCarthy as CEO. Shares plunged 10.3% on Tuesday as a broader sell-off in markets ensued.

Shares of Rent the Runway (RENT) tanked more than 38% after the company trimmed its full-year guidance and unveiled plans to cut 24% of its corporate workforce, citing “potentially rougher macro conditions.”